How to Calculate Dividend Increase Percentage
One of the core criteria when choosing which stocks to incorporate into your dividend portfolio is the ability of the dividend to grow over time. Strong and profitable companies often will increase their dividend every year in order to reward its shareholders with an even better return. These companies will do a public announcement, also known as the Declaration Date, and will then post details about the dividend including the cash amount, Ex/Eff Date, Record Date and the Payment Date.
Let’s start with a one year growth percentage of a dividend after the company raises it. In this example, we’ll use long time Dividend Growth Stock Coca Cola. Coca Cola (KO) is known as a Dividend Champion with over 55 years of increasing dividends. In the dividend world, this is a crazy long time and one of the reason why a lot of dividend investors include KO in its list of “Must Own” stocks.
But how do we calculate that Dividend Increase Percentage when a company raises their dividend? Well let’s go ahead and pull out those calculators and take a stab at it. Below is the last 5 dividend payments for KO.
In 2016, KO did four quarterly payments of $0.35 cents a share. This gives us an annual dividend of $1.40 a share. So for every share that we own, we will received $1.40 in the form of a cash dividend every year.
Like clockwork, their first dividend payment in 2017 saw the payment go up to 37 cents a share. In order to calculate how much it went up, we simply use the following formula:
(New Dividend – Old Dividend)
And then we take that decimal and multiply it by 100 to put the decimal in the right place.
In our example above, if we wanted to calculate the percent change from 0.35 to 0.37 then our calculation would look like the following:
So that means that KO raised their dividend from 0.35 cents to 0.37, or a 5.7% increase! See, Calculating the Dividend Increase Percentage is pretty easy. Of course, if that’s too much work you can always use one of the plethora of online calculators such as this one from calculator soup.